“Curb your enthusiasm.” Easy to say, hard to do!
At the end of the day, enthusiasm moves stocks. Meme stocks like AMC Entertainment (NYSE: AMC) and Blackberry (NYSE: BB) rocketed up as the Reddit community all banded together and bought these dumpster stocks with great eagerness.
Back in the late 90s, investor enthusiasm for tech stocks was so rampant and reckless that Fed Chair Alan Greenspan coined the term “irrational exuberance”. I’m quite certain that Alan would deem the rash of Meme stock enthusiasm “irrational”.
That’s how we humans roll. We tend to overreact. Terms like “FOMO” (Fear of Missing Out) have even been coined to describe trader humanity. FOMO drove Bitcoin up 850% from $6,890 to its all-time high of $65,520 in a year without any real rationale behind the move.
Traders can also be enthusiastic about dumping stocks… like Bitcoin, which dropped over 50% from its all-time high in a month. It happens with stocks. It happens with real estate. It happens in anything we humans invest in.
Enthusiasm can be based on hard data like earnings. It can also be purely emotional. It can be both.
The bottom line is it doesn’t matter what the source of the enthusiasm is. Either way, if we can detect the sentiment and ride the wave, we can cash in.
And that’s a much harder science then you might initially think…
Let me show you exactly how I translate emotion into cold, hard cash – and give you a couple of the names I’m looking at…
How I Use Technical Analysis to Cash In on Traders’ Mood Swings
I’ve got a two-step process for monetizing enthusiasm. It might look simple, but as always, the devil’s in the details.
- Detect enthusiasm.
- Verify direction with technical analysis.
A simple way to find stocks that traders are enthusiastic about is to watch CNBC, Bloomberg or any other news source. If the stock is in the news, you can bet that traders are enthusiastically jumping all over it.
I like more precision. I use scanners to scour stocks and option chains to detect exactly what stocks are being enthusiastically traded.
A few of the things I look for are Option Volume and Option Open Interest.
Option volume measures the number of option contracts traded in a day.
Option open interest measures the number of option contracts in circulation. Open interest increases as more investors take option positions.
When either of these measurements are high, there is elevated enthusiasm in the underlying stock.
When both Option Volume AND Open Interest are high, the stock is likely moving big.
Check out my Volume and Open Interest report from my “Morning Report” app:
All of the stocks in either of these lists are great candidates for a trade.
Two Big Names Making Big Moves – And Which Direction to Chase Them
Apple (NASD: AAPL) and Ford (NYSE: F) are in both the High Volume and High Open Interest reports and are even better candidates.
Now, don’t just go buying these stocks or their options. It’s critical that you verify direction which could be up or down.
Let’s start with AAPL.
Back in early June, AAPL bounced off its 200-day moving average (MA), has been in a solid uptrend and has broken above its 50-day MA. Investor enthusiasm is high. The trend is clear… UP!
Ford hit over a 6-year high back in early June after announcing its commitment to the electric vehicle market.
The stock is trading above both its 200-day and 50-day MA and after a brief correction is heading back up. Investor enthusiasm is high. The trend is clear… UP!
Both of these stocks are great trades for today.
Now obviously, this is only a tiny snapshot of the full battery of scanners I look at every day.
The Wave of Money in the Market is Yours for the Taking
There’s no doubt that trading today is far different from years past.
With the influx of mostly young, novice traders – about 72 million millennials in the United States alone – there’s over $11 million dollars up for grabs every second of every day.
Courtesy of all of that speculative money floating around the market, massive profit opportunities abound. That kind of insane buying power is creating the kind of surges rarely seen before.
To take advantage of the incredible opportunity these conditions present, I assembled a team of actual rocket scientists to develop an algorithm – codenamed BRUTUS – to identify the biggest surges in the market, before they happen.
I’m then able to use that intel to plot quick, decisive strike trades that result in huge profits.
Learn how you can make big money by playing this new phenomenon by clicking right here.
Talk soon,
Tom Gentile
